I will be on the road for a good chunk of the day, so I want to put this picture up before I leave. In an NFTRH+ update yesterday, it was noted that I did not yet sense capitulation in the PM complex (including and especially the miners).
This morning in pre-market, GDX is testing the 200 day moving average (35.15), as expected. Daily RSI, already getting nicely oversold, does not include that additional downside on this chart. It is now sub-30 and the lower the better, from a standpoint of a sector that needed a good sentiment cleaning.
There is lateral support below the SMA 200 at 34 to 34.50. All upper gaps have now been filled (turned green) with the August 12 gap up taken care of on Tuesday. The black dotted channel breakout line (not fully in context on this daily chart) is getting broken this morning, but that was likely, and in and of itself, is not something to worry about. Chart jockeys and MOMOs may see it and think “failure!” and sell. That’s what this correction is for… cleaning the sector.
The lower blue gaps are still there, but those can wait for another day, perhaps when broad stock markets take the next bear, or they may not fill any time soon because they are a series of breakaway gaps that launched this next bull leg in the miners. If I am wrong about that and the sector crashes to those gaps, then I will also be wrong that gold stocks are on the next leg up in a terribly volatile bull market that technically began in 2016. That is because we are only allowing for a quick and possibly violent break of the channel line to wash ’em out prior to upside reversal.
Supports are the SMA 200 at 35, lateral support at 34 to 34.50 and if things get really extreme and off the hook, 32, which I think is a significantly lower probability.
However, there is a lot of fuel built into this correction because as we noted previously, the SMA 200 had not been tested and was going to be tested sooner or later. Gold bug sentiment and momentum maxed out with the failed upside channel buster in October. Momentum is finally being addressed per the Bullish Percent Index. It can still go well lower, within its bull market structure.
